Dairy and plant protein products processor, Noumi, has posted a $161 million after-tax loss in its first full year of trading since shedding much of its Freedom Foods baggage, and name.
Despite record plant-based beverage sales, including an impressive 26 per cent rise in MilkLab barista product sales, Noumi has struggled with stiff competition for farmgate milk supplies, staff shortages at its Shepparton factory and other COVID-19 related market and supply chain disruptions, and rising transport and energy costs.
Soaring domestic milk procurement and production costs also chewed into earnings margins in the competitive export market for long-life dairy products.
Unless the Australian dollar drops further, the company flagged its historically strong overseas market for milk will see "significant structural change" because of the lower margins available.
However, a big marketing push with plant-based export lines such as MilkLab fuelled a 20pc rise in Noumi's total overseas sales, which meant exports now represent 30pc of the company's revenue (up from 24pc a year ago).
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Overall revenue slipped 5pc in 2021-22 to $522m, while adjusted operating earnings before interest, taxes, depreciation and amortisation fell 68pc to $7.3m.
The big $161m statutory net loss would have been contained to just $9.8m if not for the cost of a $55.6m US legal settlement on a Freedom Foods legacy issue relating to product distribution, as well as a one-off $95.7m non-cash asset impairment write down relating to declining dairy export margins.
Noumi, which sold off its Freedom Foods cereals and snacks business in early 2021 to concentrate on long-life dairy and plant-based beverage lines and nutritional powder and snack supplements, faced "significant external challenges in 2021-22", according to chief executive officer, Michael Perich.
Disappointing dairy
"We are very disappointed with the financial performance of dairy and nutritionals, with macro economic challenges and the pandemic impacting key operational turnaround initiatives," he said.
The dairy division's net revenue dropped $36m, or 9pc, to $358.3m.
The first half of the trading year was complicated by $10m in milk supply constraints to lactoferrin production, while inflation added $8m in costs and diluted the productivity gains and cost savings achieved later in the year.
Mr Perich said revenue would have risen slightly except Noumi made fewer trades into the raw milk market in 2021-22, and the pandemic made the operating environment difficult for retail sales, including nutritional supplements constrained by lockdown restrictions on gymnasiums and fitness centres.
Transformation
"However, with COVID-19 and some cost pressures stabilising, we are confident our transformation will continue its momentum and deliver improved results through 2022-23," he said.
"This will be assisted by re-negotiated domestic customer pricing, allowing us to pass through higher raw milk prices to the domestic market."
On the other hand, "productive" negotiations with export customers to pass on higher milk costs were unlikely to fully recover the price increases being absorbed this financial year, given Australia's milk shortage had undermined export competitiveness in the medium term, particularly for commodity products.
Ultimately export conditions would moderate, but any price increases paid by overseas customers this year would only cover inflation costs and would not provide a material contribution to operating margins.
More positive were export sales opportunities for MilkLab and other plant-based products in South East Asia, and sales through the "out of home" channel overseas and within Australia.
China represents 19pc of Noumi's dairy and plant-based export sales and South East Asia is worth about 11pc.
Strong performers
The MilkLab and Australia's Own brands had performed strongly, and reflected the company's investment in its out of home sales drives.
Net revenue from plant-based products grew 7pc to $164m.
The company said its underlying financial performance was expected to improve through this financial year as the pandemic's impact eases and an operational turnaround program gathered momentum, including more revenue recovery from milk product sales in Australia.
Noumi was banking on strong growth from its plant-based beverages business benefitting from demand in Australia and overseas, and product development opportunities targeting consumers moving to healthier lifestyles.
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Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
